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Spend money guilt-free on whatever you want: Be smarter about your finances.

May 24, 2009 By 4 Comments

When was the last time you spent even $100 and didn’t feel any guilt?

If you know me, you know I have a “spending” personality. I enjoy spending and typically have lived such a way. Unfortunately, being a student for most of my life, every purchase was full of guilt. Do I really need this? Should this money be better allocated somewhere else? Many people go through their entire lives living like this, even with comfortable salaries. After finishing school, I swore I wouldn’t be one of them.

But it’s one thing to say it, and another to implement a plan – so that got me digging around for the best ways to independently manage finances. I thought I’d share some things with others in a similar situation as me. I’ve come up with a few things that can be used to better manage your financial situation: Automation, Barriers, Goals, and Knowledge.

Knowledge:

Knowledge is needed so you aren’t ignorant of the fact that YES YOU DO HAVE TO SAVE MONEY.

Do you plan to have kids? Did you know that it costs between $20,000 and $30,000 per year (Not including University) to raise a child?

Do you plan on getting married? Did you know that the average wedding cost in the US is around $20,000? And that typically the budgets for those weddings are 50% of that.

This knowledge and understanding isn’t meant to scare you, but to make sure you aren’t being ignorant of the fact that you do need to save some money.

Goals:

Lets face it, it’s tough to save money without a reason for saving. It’s important to have both short term and long term savings goals. I’ve realized that a goal should not be a dollar amount, but instead an object or an event. Don’t set the goal to save $10,000 this year, because money is only a means to an end, and without knowing what that $10,000 will be spent on there is no motivation for you to save it.

Instead, set some real goals: A down payment on a house. A wedding. A yearly vacation. Things that you can feel good about working towards. This will get you some motivation to take the most important step: to implement a financial plan.

Barriers:

What do I mean by a barrier? Active and Passive barriers hinder people from saving money just as they make everything more difficult, including eating healthy and being more productive. An active barrier is a physical obstacle that’s prohibiting something, where a passive barrier is the lack of something that in turn makes things more difficult.

It is important to try to increase barriers that stop you from unconsciously spending money and to destroy the barriers that prohibit you from saving money. I’ve recently started getting my pay cheques deposited into my savings account instead of my checking accounts, the reason for this is because I don’t have access to the funds in my savings account with my debit card, and so if I want to make a purchase I need to log in to my online banking and transfer money into my checking account – which will ultimately deter me from making petty purchases with my debit card that I don’t need. Also, I’ve set up some automatic deposits from my checking account into another savings account – one that I don’t have access to funds immediately. This is by no means a full plan, but it has been helping me tackle some of the barriers while I set everything up.

The first step here is to identify the barriers that need removing or implementing. To get a better understanding on why or why you don’t do some things – try using the 5 Whys method.

Why aren’t you currently saving money? – I don’t have a savings account…
Why? – I don’t have a need for one…
Why? – I have nothing to save for…
Why? – I haven’t thought about the things I’ll need money for in the future.
Why? – I’m scared to think about those things because they stress me out.

And you’ve identified the reason you don’t save money – because thinking about finances and planning for your future scares you. Now you can work at fixing the root problem and start saving some money.

Automation:

Financial automation will solve many headaches and stresses when it comes to paying bills, saving money, and all around managing your finances. Remember how stressful paying your rent was until you set up a direct deposit? Or how many times you incurred some interest charges on your credit card because you had to physically deposit the money into the bank machine? This can all be avoided with a little financial automation.

So how do I start, what’s the plan?

Determine what’s most important for you right now in terms of saving. A new house, wedding, vehicle, furniture, etc. Rank them in order of importance. This will get some motivation for you.

Visit your bank to learn about RRSP options or talk to your employer if they have some sort of savings program as well. Get an RRSP going as soon as possible.

Open a convenient savings account – I recommend ING Direct because they allow for “virtual” or bucket savings accounts within your savings account. You can do this online or over the phone.

Contact your employer and set it up so that a % of your pay cheque goes right into your RRSP. This will take ALL the hassle out of funding your RRSP, and will insure that even if you don’t cap your limit, you will get at least some of the tax benefits. I would recommend by starting at 10% of your after tax income. So a 90/10 split between your checking account and RRSP account – your employer should have no problems doing this for you.

Note: If you’re a new grad entering the work force, I recommend building up an emergency fund before funding your RRSP. Determine how much it would cost you to survive if you happened to lose your job. IE. Rent, power, and food. (You can suspend your internet, cable, data-phone plan, etc while you find a new job.) And build up a 3-6 month safety net in an account as quickly as possible. Lets be honest, your RRSP isn’t going to help if you get laid off from your first job a few years after graduation, make sure you can survive first.

I recommend another 10% within the first day or two after your cheque is deposited to be automatically moved into your ING savings account, and it can be allocated between your long- and short-term saving buckets. IE. 5% to down payment on a house, 2% into the wedding fund, 2% into the furniture fund, and 1% into the trip to Europe fund, as an example.

Set it up that after another day or two, all your fixed costs are automatically paid for. Your utilities, rent, internet, phone, etc. (you might need to have this split over two withdraws if your employer doesn’t pay you once a month) You’ll need to budget money for food and miscellaneous things, which over time you’ll get good at keeping these consistent and knowing typically how much they’ll be. In the beginning you might want to set aside cash into another account to make sure you can cover them until you get into the routine.

Now: You’ve automatically saved money in your RRSP and long and short term savings, you have your bills paid for the month and money for food. You’ll be surprised now how much money is still in your checking account. This is your guilt-free money. Go shopping for a new pair of shoes, go out with the guys for a drink, buy that new ipod, whatever you do with it enjoy the fact that you can do it guilt-free.

A few things to note: If you have a convenience/credit card that gets you points or cash back, etc. You should use this for your purchases such as your fixed bills, food, and guilt-free purchases. If you don’t have the discipline to stop here, perhaps you either shouldn’t be using it or lower your limit. Also, try your best to cap your RRSP contributions each year for maximum benefit. Lastly, there are huge benefits to investing beyond your guaranteed personal savings accounts and RRSP. If you’re looking to diversify your investments, be sure to do some research and understand investing before jumping in. Also, be sure to invest with money that’s okay to lose.

Filed Under: Personal Development Tagged With: , , ,

How to Survive University: 11 Step Guide.

May 20, 2009 By Leave a Comment

With my upcoming graduation next Tuesday I got thinking about how I survived the last 6 years. I’ve had serious ups and downs, fantastic opportunities won and lost, have both struggled and soared, but I’ve had an all around positive experience.

So I thought I’d break down a few guide lines to follow if you want to make your University experience as fun and rewarding as possible. This list comes from 6 years of experience within an undergrad, as well as some discussion with peers.

#1: Get involved with Frosh.

I don’t care if you’re a shy introvert, I believe getting involved with Frosh activities is an extremely important aspect for University. It’s during this week where you will meet future friends, class mates, and lovers. It’s likely that no one knows you going into Frosh week so put everything from the past aside and go out and have fun.

#2: Go to class.

When I asked a few people to give me one piece of advice to survive university, this is the one that kept coming up again and again. While I haven’t always followed it religiously, I do agree that going to class makes everything else easier. It’ll be easier and less stressful to study, as well as easier to meet new people. But don’t assume that because you went to every class you’re going to get an A. You also need to learn how to study.

#3: Avoid the Snowball effect at all cost.

I think everyone knows what the Snowball effect is. It can happen with anything – not going to class, not staying in touch with friends, drinking, getting yourself into debt, etc. It seems to be very popular amongst students in first year who are perhaps unprepared for the freedom that University life brings. It starts with justifying missing one class, and before you know it you’ve missed a month and a half of Math 1010 – trust me, it’s hard to make that up. You need to condition yourself to nip this effect in the butt before it gets the best of you.

#4: Find a best friend.

Most of the time this starts with Frosh week but depending on where you went, it could also continue on from high school. I don’t mean find someone you can put up with on the weekends. I mean a true best friend. Someone that you can spill everything to – because there will be times that you’ll need to. I can’t stress enough how important it is to find a true best friend – these are people that positively influence you. Also, don’t be afraid to fire a friend if they are holding you back or negatively influencing you, it’s just not worth it.

#5: Don’t drink during the week.

Why would I drink during the week? You might ask. Because a ton of people do it, and lets face it – it’s cheap. If you’re a big party animal, save it for the weekend. Don’t let alcohol control you. Keep it out of your weekly schedule and have fun during the weekends. This gives you something to look forward to after a long hard week – work hard during the week and reward yourself by drinking with some friends (if that’s your thing), believe me, there will be plenty of time during the weekend to humiliate yourself one way or another.

#6: Get to know your professors

My advice on this one is to get to know one prof every term, personally. I suggest choosing the prof of your favourite class that term. Book office hours, email any questions for assignments, pop in to say hi, etc. Before you know it you’ll have a mentor in an area that you enjoy, a great reference for your resume, and it could be the difference between an B+ and an A. I guarantee you’ll have an easier time in all your classes if you do this.

#7: Take your time – work and play.

As mentioned, I took 6 years to do an undergrad. Do I regret it? No. I wasn’t ready for the real world after 4, I could have handled it at 5, but the extra experience and knowledge I have now vs. what I had at year 4 will allow me to hit the ground running. I am not intimidated by much anymore.

So don’t be afraid to take a term off and work, or to take a lower course load if you want to work part time or dedicate time to a relationship. It’s important to have fun during university and it’s important to have a life outside of class as well. Make sure you have a nice balance and separation between them though.

#8: Learn how you learn and when you learn.

It’s as important as studying itself. Make sure you know how to study and how you learn. I was two years into University before I understood how to study for maximum results, and when and where I could do it best. Naturally, it’s different for everyone.

If you are not a morning person, avoid 8:30 AM starts. If you can’t concentrate at night, don’t take 3-hour night classes. The good thing about University is for the most part you can pick and choose your schedule.

Probably more important than when is how. How to deconstruct a course and figure out exactly what’s involved so that you can approach it in the most efficient way possible. Apply an 80/20 rule for further efficiency. Learning how you learn can be hugely beneficial. The best way isn’t to memorize every chapter – it takes far too long and you aren’t going to remember it all anyway.

#9: Be Involved with your faculty.

Many people avoid this like the plague, but it’s a good way to volunteer and get to know a lot of people. You don’t need to hold a position on your faculty’s council to get involved. Go out to the social nights, help out with any events, and be positive about your faculty. After switching from Computer Science to Commerce, it took me a couple years to become more involved, but I guarantee it pays off.

#10: Be independent: don’t rely on anyone else.

I think this one has been drilled into my head by my parents for as long as I remember. You will likely be doing a lot of team and group work throughout university, which is definitely important for real world development. However, take responsibility for your actions and your learning. Don’t try to free-ride your way through University on someone else’s shoulders and don’t let anyone else try to use you to free-ride either. It’ll only come back to hurt you.

I found the best way to avoid this is to find a group of people with which you work very well together on anything group related. People that you trust will take responsibility for their work and ultimately create a group where the whole is greater than the sum of its parts. You will naturally filter these people throughout your years of study anyway, but the sooner you find them, the easier things will be.

#11: Brand yourself: be proactive.

As soon as you know what you want to do with your life, start working toward that goal. Don’t let others label who you are – you need to be proactive, not reactive. When you meet someone new, don’t let them form their own opinions of you without you influencing them. Build a rapport with them and make sure you convey who you are to them. Attend related events to meet the right people in your industry, and make what you want to do a part of who you are. If you’re goal is to be a respected culinary artist, be the guy who brings that awesome dish to the events, etc. Be the one who subtly gives tips for hosting great parties, etc.

How to brand yourself effectively is a blog post on its own that will get some attention down the road, so I’ll leave it at this.

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If you take nothing but one thing from this post, remember to balance things. University should be a great learning experience, should yield a lot of personal development, and naturally, be a lot of fun.

I would love to hear your comments on these, as well as any other recommendations you might have.

Filed Under: Rants Tagged With: , ,

Interview Smarter: The Three E’s to a Successful Interview

May 16, 2009 By Leave a Comment

I was helping a friend prepare for a job interview the other day and I was having trouble explaining how to bleed confidence without seeming cocky. It’s a skill that many people don’t have and it really makes you stand out if you can do it well. Needless to say it evolved into a discussion on what we felt were the most important aspects to convey during an interview, which I will now share.

There are many subtle tips and tricks that I’ll save for a post on how I approach an interview but I thought I’d give my “Three E’s to a successful interview.” There are three very important aspects that every employer is looking for during the application and interview process – Education, Experience, and Enthusiasm.

Keep in mind that by the time you land an interview, the employer is likely convinced that your Education and Experience are adequate to perform the duties of the job you’re applying for. What’s going to make you stand out is how you demonstrate your experience and education (as well as enthusiasm) in the interview.

Education:

For an entry level position in most industries, education is probably the least important of the three aspects. Of course, there is a certain threshold you need to meet – ie. Do you have a university degree, decent GPA, etc. but after that it really doesn’t matter if you scored an 80 in that course, or a 98 as so many more factors come into play.

Keep this in mind when entering an interview – when using examples or answers from your University days forget about boasting your GPA and instead focus on conveying how you learn new things and your ability to acquire them.

I do this in every interview. I focus on conveying my efficiency of learning new information and my “process” for studying, learning, etc. both formal learning and learning done outside of the classroom. This is extremely helpful if you’re applying for a position in a non-familiar industry, for example if you’re applying for a sales position or project manager in an industry that you haven’t studied or don’t have experience with. It can convince the interviewer that even though you don’t have a high knowledge of the specific industry, learning the new information involved won’t be a problem for you.

Experience:

It doesn’t take long after University that you start weighing your experience higher than your formal education. It is that moment when you realize that wearing your University ring doesn’t have the same pull as it used to (Seriously X-ers, there is a time for this, and flaunting your X-ring at 53 after 30 years of teaching isn’t impressing anyone, sorry. :) )

This category is very broad and includes more than just “work experience”, but there are a couple things I like to bring up. One quick thing to mention is that no matter what situation you talk about, make sure they know what it has done for you. Explain in detail how it has benefited you, and specifically how it has made you better at doing what you do.

Firstly, anything risky should be noted. If for no other reason than to impress. Have you taken an unpaid internship to further knowledge? Taken a 100% commission-based job because you believed in yourself? Got certified in sky-diving? Piloting? Scuba-diving? It’s really these activities that define you. Also, anything leadership-based. Have you started your own business? Organized a sports team/league? Captained your varsity team? Make sure you get into the details.

Enthusiasm:

This is definitely what will sway the decision, and rightfully so. You can’t really fake enthusiasm and motivation. It’s the reason why it can be so difficult to replace the founder-CEO of a startup: you can’t delegate motivation.

If you’re enthused, it will show. So my advice here is before your interview go get yourself excited about the position. Perhaps the pay is way over what you expected, the opportunity for advancement is excellent, it offers the ability to travel, or it’s in an industry that you love. Whatever your reason for getting excited just do it.

It’s also important here to learn about the company you’re applying to – what is there community involvement like, what does their organizational structure look like, etc. This will help show your enthusiasm.

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After participating in Dalhousie School of Business’ Tap the Talent this past September – during which I completed mini-interviews with 10 companies – I’ve taken more of an interest in how I actually interview. I may post some of my detailed notes on some of the tips and tricks I found were very successful some time down the road.

Filed Under: Personal Development Tagged With: ,